Rental/Lease/Purchase on Equipment

[fensoncont.]

Hey guys,

Theres a contracting company called Fox Contractors Corp. and they rent a lot of there equipment. I am pretty sure its setup on something called rental/lease/purchase, does that sound right?? If so can someone tell me how that works??

[CM1995]

I have used the rental purchase option on a few machines and there is a plus and minus to this arrangement. Basically you can rent the tractor month to month and a certain amount, say 6 months of rent, can be applied to the purchase price if you decide to keep it. And if you decide the tractor does not fit your operation you can send it back and you have only paid rent. The minus side to this is you end up paying a higher interest rate if you decide to buy it.

I have leased my first machine recently. It is a new 725 artic. Actually it was cheaper to lease it for two years and pay the risidual than pay cash for it:beatsme. It just depends on your work load, your $$$ situation and your dealer.

[fensoncont.]

Thank you for the information.

[CM1995]

No problem.:thumbsup

[MSC]

There are also some finance companies out there that will write up a purchase as a lease, then there is a $1.00 buyout at the end of the term, and then you own the machine.
I have done this twice, and it has worked out well both times.
If anyone needs the name of the company and a phone # pm me and i'll put you in touch with the person who I deal with.
Rich

[CM1995]

There are also some finance companies out there that will write up a purchase as a lease, then there is a $1.00 buyout at the end of the term, and then you own the machine.
I have done this twice, and it has worked out well both times.
If anyone needs the name of the company and a phone # pm me and i'll put you in touch with the person who I deal with.
Rich

One thing to think about is the tax consequences. The IRS does not treat this type of lease as a true tax lease where you can expense 100% of the payments. You have to have a fair market risidual to qualify for a true tax lease. But this is just my .02 I am not an accountant.

[Finance Guy]

CM1995... You are correct. A $1.00 buyout option on a lease is not a true lease and does not have all the advantages of a residual type lease that is completely tax deductible. Some people prefer the $1.00 buyout and some people prefer the residual program. Regardless, either program is an off balance sheet transaction and does not show up on your bureau. The benefit of that is to preserve your bank lines if additional cash flow is necessary from your bank. ETC...

Call me if you have questions.

FG

[Torsten]

I'm looking into this issue my self. Does anyone have sample leasing contracts. OK, I guess most of you are in the US with different legislation and business practices, but I could adopt it to South Africa as well.

[grapple1]

here in BC, same principles apply with the lease to $1.00 but instead of having to buck up all the tax up front when you sign off, you just pay it monthly.